Posted on July, 14, 2022 at 08:23 am
Last month’s State-of-the-Nation Address served up a sweet and sour menu. On the one hand it brought good – albeit debatable – news of Uganda’s ascension to Middle Income Status and, on the other, lamented low productivity in agriculture.
This is not new. In my view, the critical factor for agricultural transformation is the nature of the agricultural produce market for farmers.
Despite decades of numerous initiatives to improve market access, farmers are still at the mercy of an exploitative market system of middlemen, which in turn affects the growth of the entire sector. Unfortunately, the depth and strangle of this market system on poor farmers is barely understood and naively glossed over by policy makers when designing initiatives.
But how did we get here? Following the unmitigated economic liberation of the 1980s/1990s, farmer cooperatives which previously did bulking and marketing on behalf of farmers, were disbanded and in their place rose layers of middlemen.
While these initially brought some advantages such as convenience and immediate cash at selling, they have over time consolidated to become predatory cartels that control local, regional and national agriculture produce markets through which they cream mega profits off farmers.
When farmers try to bypass them to get better prices, the cartels have well-coordinated and economically powerful networks which collude to frustrate them.
While working with Caritas Prague in Buikwe to support coffee farmers, I witnessed, firsthand, how farmers we helped to bulk and market together attempted to bypass local middlemen but ended up selling at worse prices than if they had sold in the usual way. As a rice farmer, I have dealt with similar challenges in Kampala.
Sadly, these predatory cartels are unwittingly viewed positively by the government as contributors to the development of agriculture marketing, and receive billions of cheap government credit for example under the Agriculture Credit Facility in amounts that are not available to marginalised farmers.
The effect of this market structure is that due to poor prices, farmers’ returns on investment are very low. As such, there is no economic and market incentive to invest more and improve their livelihoods. For example, farmers who attempt to do quality assurance for higher returns get a negligible increase in prices. As such, we continued to have stony rice and raw-harvested coffee. This, in my view, is why the sector has failed to improve despite decades of government programmes to transform agriculture from subsistence farming. Not surprisingly, the growth rate of agriculture is always lower than overall GDP yet it employs the biggest number of people.
The above agriculture produce market structure is an example of the structural cause of poverty. People are poor not because they are not hard working, but because of wider social, political and economic systems beyond them which they can’t easily overcome. Farmers cannot easily overcome such systems on their own as is widely assumed.
Breaking the choke-hold of this market system on smallholder farmers can go a long way in unleashing the long-awaited agriculture transformation. This can be done through enacting fair trade fiscal incentives whereby companies buying directly from farmers at competitive prices benefit from some tax waivers. Given its importance, the government also needs to get involved through innovative public-private partnerships.
For example, it can partner with e-commerce platforms such as Jumia and Safeboda to develop rural networks for pooling produce that provide logistical and payments systems for farmers.
These can work back and forth to provide farm inputs as well, which can make the system even more viable.
Such initiatives will need reorganising the sector for instance through digital systems for farmer/farm enterprise registration that enable data-driven pooled produce stock management, payments, quality control and traceability.
Source: Monitor